If you brake a property rental contract in the UK it is both expensive, you’ll loose your deposit, and can lead a court case, as you are legal responsible for the cost of that property. As a result, if you’re going to rent a property in the UK, you need to know how much rent you can afford to pay before you start renting.
Remember, renting a house or an apartment is most likely be the largest amount of money you will spend each month, so you need to make sure you are ready and able to do so.
Utilities
The first step is to look at rents around the area. You must figure out if these rent prices include utilities or not. Utilities can add on a few hundred pounds a month depending on your location and your usage. This means that somewhere that seems affordable could end up being the complete opposite once you get all of your monthly charges.
Utilities generally come in four different categories; water bills, service charges, gas/electric, and council tax. These are things that are non-negotiable so it is best to always factor these into your rent as well so you are not surprised by the charge at the end of the month.
When looking at utilities it is advised to look at the total of your bills. Say you have to pay only heat and electricity for your rental property. That would make it seem like you could look at a bit more expensive ones. However, you may have forgotten that the internet, TV, and phone bills, as well as any other bills you have, will not stop either. You will still have to pay for those.
Monthly Income
Personally, I feel that you can safely look at rents that are 35% or less than your total monthly income. This 35% should include utilities as well if you are trying to play it safe.
This is a very doable percentage for housing in North England but in large cities such as London, it may be much more difficult. The average percentage spent on housing costs for those who live in London is a whopping 50%.
If you are looking to be more lenient on your percentages experts state that going up to 45% of your monthly income is okay. However, going beyond this could put you in a bad financial spot overall.
If you find the perfect place and agree to pay a certain amount then you may not be able to save any money or have any money for fun things. On a harsher side, you may find yourself unable to pay other bills or buy enough food. Going over 45% could greatly impact your life in a negative way.
20% To Savings
It is suggested by experts that when receiving your check put away 50% for necessities like food and rent and other bills. Then, as normal 20% goes into savings so that you can start to save up slowly. The rest after that is considered fun money. You can use them to buy things or go out for a night but everyone needs those relaxing times so it is best to plan for them.
Across the UK the average monthly income stands at about £2,084, This adds up to a yearly income of £25,008. Other statistics have stated that the gross average income stands at £29,600 a year, so let’s look at both ends of this spectrum.
On the low side of the average, the individual makes £2,084 a month, 35% of that is £729 roughly, 45% is £937 roughly. This gives a range of rent prices for you to look at. However, be sure to always ask if utility costs are included because the cheaper the rent the more likely it is that they are not included. Once again that could bring the rent up a few hundred pounds and have you at your max rent or even over it sometimes.
On the higher end of the average, the individual makes about £2,466 a month. It is only about £400 more than the low side but it does make a difference. So, 35% of that is roughly £863 and 45% is roughly £1,109.
As you can see there is a bit of overlap from £863 to £937 where these incomes could go for the same property. Once again though, looking at whether or not utilities are included makes a large impact on what you are able to pay.
Final Thoughts
Charting out your budget based on your monthly income is a good idea whether you are searching for a new place to rent or are continuing to rent your current place. Financial planning is something that will make your life go smoother, especially if you want to move anytime soon.
